The textile industry is booming, and the company's main business continues to recover: the company has been deeply involved in the printing and dyeing industry for many years and is actively exploring the market. Printing and dyeing revenue increased from 2.9 billion yuan in 2016 to 4 billion yuan in 2023, with a CAGR of nearly 5% in the context of industry stock competition. The textile economy was running smoothly in the first half of 2024. According to data from the China Textile Industry Federation, the textile industry composite sentiment index for the second quarter was 63.3%, which was in the expansion range of more than 50% for 6 consecutive quarters. Along with the improvement in downstream textile manufacturing sentiment and a marked recovery in exports, the company is expected to rely on years of technology and scale advantages to promote profit optimization and main business restoration.

The printing and dyeing industry continues to adjust, and the company benefits from industry pattern optimization: driven by factors such as the printing and dyeing industry policy environment, energy consumption constraints, intelligent transformation, and supply chain reshaping, etc., the company's printing and dyeing business revenue in 2016 accounted for about 0.74% of the revenue of printing and dyeing enterprises compared to regulation, and increased to about 1.34% in 2023. The company's main business is printing and dyeing, and the upstream and downstream supporting industries work together efficiently. Under cost reduction and efficiency, the company's gross margin remains above 20%, and profitability continues to lead the industry. The company is equipped with thermoelectric and sewage treatment facilities, and the dual control of energy consumption has little impact on the company. At the same time, through years of continuous digital and intelligent transformation, the company's production side can respond quickly to changes in industry demand.

Expanding the gold and jewelry business, benefiting from high gold consumption in the medium to long term: in 2018, the company acquired Hangmin Baitai to expand its gold jewelry processing business, and signed an agreement to acquire 65% of Shenzhen Shangjinyuan's shares in 2023, expand the gold and jewelry wholesale business, and strengthen the company's gold and jewelry industry chain layout. The company is one of the top ten domestic gold jewelry processing enterprises. It maintains stable cooperation with terminal brands. The annual production capacity of the gold and jewelry business reached 80 tons. In 2023, the company's gold and jewelry business revenue was 5.33 billion yuan, an increase of 6% over the previous year. The current price of gold in London rose by more than 12% in 2023. The rise in gold prices led to a boom in terminal consumption. Consumer demand for gold jewellery increased 10% year on year; after the rapid rise in gold prices in March 2024, Q2 gold prices remained high, compounded by factors such as expectations of interest rate cuts by the Federal Reserve and geographical risks. Gold prices are expected to remain strong in the medium to long term, supporting the gold consumption boom.

Investment advice: The company's leading position is stable, and the main business continues to recover. We expect the company to achieve operating income of 10.522/11.697/12.442 billion yuan and net profit to mother of 0.755/0.824/0.916 billion yuan in 2024-2026, corresponding to the current PE of 9.53/8.73/7.86 times, respectively. For the first time, it was covered and given a “gain” rating.

Risk warning: downstream demand falls short of expectations; stricter environmental policies; macroeconomic fluctuations, etc.